AMLO won. Now what?

To little surprise, Andrés Manuel López Obrador (AMLO) has just won Mexico’s presidential election. Who is AMLO and what does this mean for Mexico? What are the implications for U.S. companies that do business with Mexico?

  • Leftist Andrés Manuel López Obrador (AMLO) won Mexico’s presidential election on July 1 in a landslide victory
  • AMLO received more than 50% of the vote and the next two closest candidates conceded (each receiving 23% and 15% of the vote respectively)
  • Peso weakened 1.1% relative to the U.S. dollar on July 2 after the election (Bloomberg)
  • AMLO’s campaign focused on fighting corruption, violence, and poverty

Who is AMLO?

López Obrador, typically abbreviated as AMLO, is a 64-year old leftist politician. He has run for president twice before and has been a figure in Mexican politics for decades. He began his political career in 1976 as a member of the Institutional Revolutionary Party in Tabasco.

AMLO is often described as a populist or nationalist and ran a campaign with an anti-establishment platform focused on the fight against corruption and state-centered policy. In this year’s presidential race, he led a leftist coalition called “Juntos Haremos Historia” (“Together we will make history”), which is an alliance between the Labor Party (PT), Social Encounter Party (PES), and the National Regeneration Movement (MORENA).

Despite being the most disruptive candidate in the race, AMLO’s third run at the presidency has also been his most moderate in terms of rhetoric.

How will this affect Mexico’s fiscal policies?

AMLO has proposed an economic agenda and platform based on high public spending (i.e. public infrastructure, scholarships for vulnerable groups, energy, food subsidies) with no proposal of tax changes in the short term.

There are no short-term changes expected on income tax. However, the inconsistency between AMLO’s public policy proposals and their fiscal viability is an area of concern. This inconsistency has raised fears regarding the public financial management and health of Mexico’s global macroeconomic position.

AMLO’s economic proposals are primarily focused on boosting Mexico’s production and domestic market.

What are the implications for foreign business partners?

There is widespread uncertainty regarding whether Peña Nieto’s structural reforms will continue under AMLO’s presidency. Analysts are concerned that AMLO will cut policies that encourage foreign capital in Mexico, such as Peña Nieto’s energy and telecommunications reforms. AMLO was a harsh critic when Mexico opened its national industries to private competition in 2013, and has promised to freeze the price of fuel and electricity in the country.

AMLO has made it clear that he wants to reduce Mexico’s dependence on U.S. refined gasoline imports by heavily investing in both new and existing refineries. He also plans to reduce food imports by increasing the productivity of Mexican farms. The resulting Mexico-focused, state-centered policy is likely to clash with Trump’s “America First” agenda, thereby impacting the volatility of the peso and the renegotiation of NAFTA.

This election could mean significant changes for Mexico, but it is too soon to tell which policies will be implemented and when. Business leaders in both Mexico and the U.S. will be following AMLO’s presidential journey closely. Our team at Wizeline is committed to bridging the gap between borders and creating business relations that foster innovation.

David Salak

Posted by David Salak on July 2, 2018